A Central Bank That Accommodates an Aggregate Supply Shock

question 22

Multiple Choice

A central bank that accommodates an aggregate supply shock

• A)increases the money supply,making the inflation rate rise.
• B)increases the money supply,making the inflation rate fall.
• C)decreases the money supply,making the inflation rate rise.
• D)decreases the money supply,making the inflation rate fall.

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Definitions:

Law Of Increasing Opportunity

The principle that the opportunity cost of producing a good increases as more of that good is produced, reflecting trade-offs in resource allocation.

Production Possibilities Curves

A graphical representation that shows the maximum combination of goods and services that can be produced by an economy with given resources and technology.

Trading Possibilities Curves

Graphical representations showing the different combinations of goods that two countries can trade, given their resources and technology.

Mutually Advantageous Trade

Trade that benefits all parties involved, allowing each to gain something of value by exchanging goods or services.